Publication: Monitor Volume: 7 Issue: 169

The Central Bank of Russia (CBR) released data on September 11 regarding foreign trade developments on a payments basis for January-July 2001. Divergent trends in aggregate exports and imports in July have further trimmed the country’s merchandise trade surplus, largely due to developments in trade with the Far Abroad, that is, countries outside the CIS. In July, aggregate exports were 6.8 percent less in dollar terms than in the same month of 2000, while imports rose by 18.3 percent. Exports to the Far Abroad fell 8.9 percent year-on-year in July. Imports increased by a whopping 32.8 percent. The trends in trade with the CIS were in sharp contrast, with exports to that region rising 9.5 percent and imports down 14.1 percent.

For the first seven months of this year, Russia’s total exports amounted to US$60.5 billion, only 4.4 percent more than in the year-earlier period. Imports in January-July were US$28.8 billion, a 20.2 percent jump year-on-year. The resulting merchandise trade surplus of US$31.7 billion was 6.7 percent less than the US$34.0 billion surplus earned in the same period of 2000. Almost the entire surplus in the first seven months of this year was earned with the Far Abroad, despite the slackening of exports due primarily to the worldwide economic slowdown and the surge of imports as Russian aggregate demand continued to rebound and the ruble strengthened. The surplus with the CIS countries amounted to only US$979 million, down 4.6 percent relative to January-July 2000.

The narrowing surplus on merchandise trade has resulted in a smaller current account surplus. The CBR has also made available a preliminary estimate for Russia’s balance of payments for the first half of this year. The CBR puts the first half current account surplus at US$21.2 billion, down 7.0 percent from the US$22.8 billion earned in the same period of 2000. The adjustment is due in part to the reduction in the trade deficit. The degree of the adjustment is much more impressive when the current account surplus is considered as a share of dollar GDP. We estimate that in the first half of 2000, the current account surplus represented 20.9 percent of GDP converted into dollars at the average market exchange rate. The same calculation for the first six months of 2001 reveals that this share has declined to 15.1 percent.

The adjustments toward a more sustainable external payments situation can also be observed in the estimated capital account for the first half of this year compared with the same period of 2000. The current account surplus for each of the periods is of course matched by large deficits in the financial account and increases in the stock of foreign reserves. Foreign reserves rose US$9.3 billion in the first half of 2000, but a more modest US$7.1 billion in the same period of this year. An estimate of the illicit component of capital outflows that can be calculated from the preliminary balance of payments numbers indicates that capital flight declined from US$7.1 billion in the first half of last year to US$5.1 billion in the first six months of 2001. While capital flight had been holding steady at 6-7 percent of dollar GDP throughout 1996-2000, the 2001 figure represented a marked decline to only 3.6 percent (